Chapter 17: Pricing of services

Question 1

Basic types of Pricing (3)

Answer 1

• Cost-based pricing
• Competitions-based pricing
• Demand-based pricing

Question 2

Reference price

Answer 2

A reference price is a price point in memory for a good or a service; it can consist of the price last paid, the price most frequently paid or the average of all prices customers have paid for similar offerings.

Question 3

Non-monetary costs

Answer 3

Represent other sources of sacrifice perceived by consumers when buying and using a service. Time costs, search costs and psychological costs often enter into the evaluation of whether to buy or rebuy a service, and may at times be more important concerns than monetary price.

Question 4

Value is low price - ‘Value is price, which one is on sale’ (5)

Answer 4

• Discounting pricing
• Odd pricing
• Synchro pricing
• Penetration pricing
• Dynamic pricing

Question 5

Value is everything I want in a service - ‘Value is the best performance’ (2)

Answer 5

• Prestige pricing
• Skimming pricing

Question 6

Value is all I get for all that I give - ‘Value is how many rooms I can get cleaned for what the price is’ (4)

Answer 6

• Price framing
• Price bundling
• Complementary pricing
• Results-based pricing

Question 7

Value is the quality I get for the price I pay - ‘Value is the lowest price for a quality brand’ (2)

Answer 7

• Value pricing
• Market segmentation pricing

Question 8

Discounting pricing

Answer 8

Service providers offer discounts or price cuts to communicate to price sensitive buyers that they are receiving value.

Question 9

Odd pricing

Answer 9

Odd pricing is the practice of pricing services just below the exact Euro amount to make buyers perceive that they are getting a lower price.

Question 10

Synchro pricing

Answer 10

Synchro-pricing is the use of price to manage demand for a service by capitalizing on customer sensitivity to prices. Time, place, quantity and incentive differentials have all been used effectively by service firms.

Question 11

Penetration pricing

Answer 11

Penetration pricing is a strategy in which new services are introduced at low prices to stimulate trial and widespread use.

Question 12

Dynamic pricing

Answer 12

Is a form of technology-led synchro-pricing frequently used as part of a revenue management/yield management model. It involves the buying and selling of goods and services in markets in which prices move quickly in response to supply and demand fluctuations.

Question 13

Group buying sites

Answer 13

Is a concept that the greater the number of people who want to buy the service, the lower the price will be for everyone. E.g. Groupon

Question 14

Aggregators

Answer 14

(comparison websites) Are website portals or search utilities that enable clients to gain several
quotes or prices via an electronic e-quote form.

Question 15

Online auction sites

Answer 15

Used for auctioning products rather than services. the highest bid at the end of the auction period gets the meal package at that price. E.g. Vakantie veilingen.

Question 16

Prestige pricing

Answer 16

Is a special form of demand-based pricing by service marketers who offer high-quality or status services. Starbucks

Question 17

Skimming pricing

Answer 17

A strategy in which new services are introduced at high prices with large promotional expenditures, is an effective approach when services are major improvements over past services. Customers are more concerned about obtaining the service than about the costs of the service.

Question 18

Value pricing

Answer 18

The widely used term value pricing has come to mean ‘giving more for less’. In current usage it involves assembling a bundle of services that are desirable to a wide group of customers and then pricing them lower than they would cost separately.

Question 19

Market segmentation pricing

Answer 19

a service marketer charges different prices to groups of customers for what are perceived to be different quality levels of service, even though there may not be corresponding differences in the costs of providing the service to each of these groups. E.g. student discounts.

Question 20

Price framing

Answer 20

Because many customers do not possess accurate reference prices for services, services marketers are more likely than product marketers to organize price information for customers so they know how to view it.

Question 21

Price bundling

Answer 21

Bundling, which means pricing and selling grouped rather than individual services, has benefits to both customers and service companies.

Question 22

Complementary pricing (3)

Answer 22

Captive pricing: offers a base service and then provides the services needed to continue the service.
Two-part pricing: printers are normally cheap, but they make up the loss with higher prices for the ink, paper or maintenance costs.
Loss leadership: when providers place a familiar service on special, largely to draw the customer to the store and then reveal other levels of service available at higher prices.

Question 23

Results-based pricing

Answer 23

Service in which the outcome is very important, but uncertainty is high, the most relevant aspect of value is the result of the service. E.g. universities, students most value is getting a job after graduation.